2018 (5) TMI 932 - Tri - Insolvency and Bankruptcy

Initiating the corporate insolvency process against the respondent-corporate debtor - existence of eligible default - Held that - The dates on which the default occurred are given in Column 2 of Part-IV of the application and are taken as the period of one year from the date of the respective Receipt-cum-Acceptance Letter and which date is also shown as maturity date of agreement therein. The amounts shown as Projected Values are stated to be not paid and total to ₹ 12,32,000 (the individual amounts in default of the three applicants are above ₹1.00 lac). The factum of non-payment is accepted by the respondent in the reply submitted by Diary No.985 dated 02.04.2018. We are satisfied that default has occurred and the application under Section 7(2) is complete. We also find that the proposed Interim Resolution Professional Shri Deepak Gupta has filed Form 2 dated 18.01.2018 (Annexure A-12 of the application) certifying that there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professionals of ICAI. Therefore, we are satisfied that the conditions prescribed by Section 7(5)(a) of the Code are satisfied and the petition deserves to be admitted. The petition is, therefore, admitted and the moratorium is declared accordingly.

Summary

Issues Involved:

1. Jurisdiction of the Tribunal.
2. Status of the petitioners as financial creditors.
3. Default by the corporate debtor.
4. Admissibility of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016.
5. Declaration of moratorium.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Tribunal:

The respondent, M/s SMD Infra Ventures Pvt. Ltd., was incorporated on 23.08.2011 with its registered office in Sangrur, Punjab. Therefore, the matter falls within the jurisdiction of the National Company Law Tribunal, Chandigarh.

2. Status of the Petitioners as Financial Creditors:

The petitioners filed the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, as financial creditors. The petitioners invested a total amount of ?11,10,000 based on the respondent's assurances that plots would be allotted within 250 days, failing which the invested money along with interest would be returned after one year. The respondent issued Receipt-cum-Acceptance Letters to the petitioners, which stated the maturity amount as Projected Value. The Tribunal noted that the petitioners are financial creditors as defined under Section 5(7) of the Code, considering the time value of money built into the investment agreements.

3. Default by the Corporate Debtor:

The petitioners claimed default based on the respondent's failure to return the maturity amount after one year from the date of investment. The dates of default and the amounts claimed were provided in the application. The respondent admitted to the delay in returning the amount, attributing it to the poor state of the real estate market, but did not dispute the status of the petitioners as financial creditors or the occurrence of default.

4. Admissibility of the Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016:

The Tribunal examined whether the application met the requirements of Section 7 of the Code. The petitioners furnished the necessary documents, including the Receipt-cum-Acceptance Letters and the proposed Interim Resolution Professional's details. The Tribunal found the application complete and noted that the respondent did not raise any objections regarding the petitioners' status as financial creditors. The Tribunal referred to the judgment in Nikhil Mehta & Sons Vs. AMR Infrastructure Limited, which clarified the criteria for being considered a financial creditor.

5. Declaration of Moratorium:

Upon satisfying that the conditions under Section 7(5)(a) of the Code were met, the Tribunal admitted the petition and declared a moratorium in terms of Section 14(1) of the Code. The moratorium prohibits the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of assets, and actions to recover property by owners or lessors. It also ensures the continuation of essential goods or services to the corporate debtor during the moratorium period.

Conclusion:

The Tribunal admitted the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, and declared a moratorium. The matter was posted for further orders on the appointment of the Interim Resolution Professional and additional directions. The Tribunal directed that the order be communicated to both parties.